Memorandum submitted by Waitrose (SFS 68)
There are a number of challenges facing the UK food system, notably from pressures on supply, environmental threats and the current economic climate. Principal stakeholders have to be responsible for recognising and addressing what they can do to promote the long-term sustainability of UK agriculture and the farmer supply base. Additionally, pressures on reducing the costs of production are being hindered by lack of investment in agriculture based science research. Only looking at short term solutions poses a significant threat to UK food security over the coming decades.
Waitrose - background:
i. Waitrose, the food shops of the John Lewis Partnership, has 198 supermarkets in the UK, combining the convenience of a supermarket with the expertise of a specialist shop. Each one of our 40,000 employees (or Partners), is a co-owner.
ii. An additional 22 Waitrose branches will be opened across the country in 2009 as a result of organic growth and the acquisition of 13 Somerfield stores, creating jobs for 4,000 new Partners.
iii. We also own the Leckford Estate in Hampshire, a working farm producing wheat, milk, apples, pears, apple juice, cider, free range eggs, mushrooms and chickens.
iv. We extend the broader notion of partnership to our suppliers. Waitrose's whole business approach is deeply rooted in long-term, mutually beneficial relationships with its producers and suppliers. We were the first retailer to establish dedicated Producer Groups, which aim to ensure we consistently meet the quality and variety our customers expect in the long-term.
EFRA Committee questions:
1.0 How robust is the current UK food system? What are its main strengths and weaknesses?
1.1 The UK food system is not as robust as many believe when judged by last year's spike in global food prices. This illustrates the significant challenges that lie ahead. Many sectors of the industry have become too concentrated. The poultry industry for example is characterised by a relatively small number of producers and a few very large processors. With a significant proportion of the ownership of these processors held by overseas companies, the potential disadvantage if supply was threatened in any way is increased.
The pig sector provides another example, as highlighted in the recent EFRA report on the state of the English pig sector. The national pig herd has fallen by 40% over the last decade; there has also been a reduction in production of 36% in the same period in addition to a significant rationalisation in the number of processing businesses operating. The result has been a significant rise in the volume of imported pig meat, much of which is produced to welfare standards which would be illegal in the UK. This is a scenario being mirrored across several sectors. Lack of profitability and the burden of regulation has led to an exodus of farmers and a subsequent growth in import requirements to satisfy consumer demand.
1.2 Contingency responses to recent instances of threats to the food chain (such as animal disease, the floods of summer 2007 and two wet summers) have shown that collaborative, trusting and well-established relationships between retailers and their suppliers/producers have proven crucial at times of crisis.
1.3 Increasingly the food chain is finding itself vulnerable to threats of a scale that cannot be protected by typical market mechanisms or other existing contingency procedures - from the combination of rising demand and limited resources, to climate change and risks to energy security. This is why it is so important that the principal stakeholders at every level of the food chain recognise and address what they can do to promote the long-term sustainability of UK agriculture and the farmer supply base. Failure to do so, sticking instead to only considering short-term options, poses a significant threat to UK food security over the coming decades.
1.4 The number of European farm workers has been reduced due to the strong Euro and has decreased job opportunities in the UK. This places pressure on wages and affects the ability to harvest crops.
1.5 The market for organic fruit and vegetables has slowed, placing pressure on producers.
1.6 Best practice in the supply chain can be achieved by sharing information which helps protect brand integrity and drive efficiency. Maintaining standards help protect a brand and if they are shared, costs are reduced benefitting retailers and consumers. The Waitrose dairy model provides a good example. Up to 12 dairy farmers[i] are going out of business each week but Waitrose dairy farmers have the best levels of investment in the UK. Our business model is collaborative and allows farmers to get a fair return and take a leadership role in sharing best practice to improve efficiencies. This results in a cycle of better returns, more investment, better efficiency and sustainable businesses in the long term.
1.7 At the heart of our supply chain are our Producer Groups that operate across our livestock, milk, farmed fish, fruit and vegetable categories. These groups offer farmers a forum where they can share best practice and set mutual business objectives. At present we operate more than 30 distinct groups for livestock, from Aberdeen Angus beef to Select Farm chicken.
1.8 Waitrose is passionately committed to sourcing produce from UK producers wherever possible and from a wide a variety of small, local suppliers. We source 100% of our milk, eggs, chicken and pork from British producers, and support over 450 local and regional suppliers.
1.9 Clearly Waitrose is only one retailer in a crowded market place. Nonetheless, broader recognition is needed throughout the food chain of the importance of thinking long-term when it comes to sustainability, and the benefits to be had by all from securing a strong, competitive future for UK producers. Research and Development (R&D) is vital and a clear direction is needed from government. In addition, by applying science, better decisions for the future can be made, particularly when considering how to make the best use of our limited natural resources. For example soil health, efficient use of water, exploring varietal and breed development are key areas that can be investigated.
2.0 How well placed is the UK to make the most of its opportunities in responding to the challenge of increasing global food production by 50% by 2030 and doubling it by 2050, while ensuring that such production is sustainable?
2.1 The UK faces a domestic as well as a global challenge to meet rising demand for high quality food from a growing population, with limited and potentially diminishing land resources. We must ask whether everything is being done to ensure UK producers are well-placed to meet this challenge over the next four decades.
2.2 It is important that there is a shared recognition of the scale and seriousness of this challenge. In addition, effective collaboration, where appropriate, is necessary at every level of the food chain, as well as across government and the wider public. For instance, the challenge to become a less wasteful society needs to be addressed by the public as well as by industry.
2.3 We must equip our food producers, particularly UK farmers, with the right tools to enable them to meet our food production challenges. This means: identifying what those tools are; investing in their development; encouraging innovation to drive efficiency of production; promoting skills and the flow of fresh talent into the sector. All of this needs to be underpinned by a coherent strategic approach and long-term investment.
2.4 In the 1970s and 1980s, the UK made great strides in farming productivity. This was primarily down to a well funded and co-ordinated programme of R&D on behalf of the industry. This kind of dedicated R&D has become a forgotten element and needs to be resurrected. This will require targeted investment, for instance in developing the UK science base in agricultural technologies.
2.5 The UK must make sure we are taking advantage of new and developing technologies to introduce efficiency and clarity.
2.6 Innovation need not be entirely technology-based either. For instance, Waitrose invested the necessary R&D into genetics on behalf of our pig farmers and supply food at competitive rates. These measures help to drive efficiency at a farm level, but also ensure Waitrose receives a consistent supply of high quality pig meat while the UK is experiencing massive reductions in herd size. As a consequence, Waitrose has been able to ensure that 100% of our pork, bacon and sausage are UK-produced. A collaborative approach would ensure that best practice like this can be shared throughout that sector to the long-term benefit of the whole food chain.
3.0 In particular, what are the challenges the UK faces in relation to the supply side of the food system?
3.1 Water Availability
The efficient use of water is vital as in addition to an increased domestic demand on supply, the effects of climate change will result in an overall reduction of resource, impacting on its use in agriculture. For example the last two wet summers have had a debilitating effect on the agricultural industry, leading to a loss of crops, reduced sales and poor yields.
3.2 Marine environment.
Waitrose continues to actively promote responsible fishing, only stocking sustainably managed wild caught fish. This includes one of the largest ranges of line-caught fish on the high street. The range only uses farmed fish from carefully selected farms which have been cited for their respect for marine ecosystems, animal welfare standards and conservation measures.
3.3 Science base.
While government funding for science doubled to £3.4 billion in 2007, funding for strategic and applied agricultural research has declined significantly with more emphasis being placed on environmental and socio-economic research. Investment via MAFF (now Defra) fell by 45% between 1986 and 1998 and overall Defra's funding for sustainable agriculture will fall by a further 20% by 2010/11 on top of a 12% cut in 2006/07. This reduction in funding has resulted in the loss of a number of agriculture research teams and their expertise, as research organisations have closed some or all of their facilities. Future government and industry research funding needs to be increased and focussed on how to produce more food safely and efficiently.
3.4 Farmed land.
There are many competing demands for land use in the UK, not least growing pressure to use land to help meet our renewable energy obligations. In addition the amount of land will be reduced as farmers sell their farms. This acts as another barrier to entry for those looking to enter farming as a career. Defra has acknowledged that guaranteeing levels of UK livestock and arable output is crucial to UK food security in the long-term. Therefore, it should be supporting farmers by providing clear direction on the future of renewable energy opportunities in the UK and incentivising the use of existing farmland accordingly.
4.0 What trends are likely to emerge on the demand side of the food system in the UK, in terms of consumer taste and habits, and what will be the main effect? What use could be made of local food networks?
4.1 The British public have moved from wanting access to a wide variety of high quality food at reasonable prices to becoming more cost and 'offers' conscious. A proportion of the public are demanding to know that the food they buy is sustainably sourced, with respect paid to animal welfare and to the farmers responsible for producing the food. Waitrose mitigate costs through collaboration, setting standards and making every effort consistently through best practice to reduce costs to the consumer.
4.2 There is no sign yet that the economic downturn has diminished the demand for provenance amongst the portion of the population represented by our customer base. This continues to be borne out by our strong Christmas sales figures.
4.3 We are seeing an ongoing demand for quality food with sales of free-range increasing year on year. Although organics is slowing, it is not decreasing significantly in the meat and poultry sectors. However, Waitrose customers probably don't reflect the market as a whole because our customers do tend to make 'ethical' buying decisions in preference towards fair trade, free range and organic. This leads us to over-index the grocery market share.
4.4 Buying British is important to consumers, but they are often not prepared to make product compromises when making a purchase. Ultimately, the products bought have to be fresh, good value for money and in the variety and format desired. For instance research shows that when consumers are faced with buying apples from the UK or New Zealand, price and quality will influence buying decisions. However, British flags on packaging have the potential to make consumers feel considerably better post-purchase about supporting farmers in the UK. It can also help them to think that they are eating seasonally - something else they claim is important. However, with consumers becoming increasingly savvy, sustaining high animal welfare and production standards does cost money and will impact on the weekly shopping bill.
4.5 Only with broad public understanding will we see the sea change in consumer behaviour needed to guarantee the sustainability of UK producers. That fundamental shift will be around recognising the greater relative value of 'home-grown' British food from sustainable sources, and it will not happen without a stronger government-backed push. This needs to start with primary schools educating children about our strong UK farming industry coupled with promotion of a strong culture of British food.
4.6 Local food networks are absolutely key to promoting both of these. Waitrose 'Local and Regional Sourcing' remains one of the most established local sourcing initiatives in its sector. The programme represents a breakthrough for small producers wishing to supply a multiple retailer, but unable to support a whole store network. Our dedicated local sourcing team continues to search the UK for the finest local and regional products, actively working with existing and new suppliers to take local and regional sourcing into new territories.
4.7 Our dedicated regional buyers work very closely with the regional food groups to source products that reflect the provenance of the area and celebrate artisan production. A number of producers that came to Waitrose under the Regional Food Project have since developed their business to supply us at a National level.
5.0 What role should Defra play both in ensuring that the strengths of the UK food system are maintained and in addressing the weaknesses that have been identified? What leadership and assistance should Defra provide to the food industry?
5.1 The challenges to government and Defra begin with the need to provide better strategic clarity. This must be on key issues to enable different parts of the food chain to focus their efforts in the right areas. While the tone of the government's rhetoric has certainly become more focused on the challenge of food production in the last year, particularly since the publication of the Food Matters report, it is yet to translate into crystal clear leadership in key areas. Recommendations include:
· Lead on food issues providing clarity on food policy and environmental strategy.
· Be responsible for technical and scientific experience, directing the policy and strategy depending on what the ultimate definition of Food Security is.
· Develop a better understanding within the Department of the day-to-day realities of working within the UK food chain. Solutions offered at official level to recent instances of animal disease showed a poor grasp of 'on the ground' practicalities for many farmers.
· Greater investment in R&D could help increase support to the UK farming sector and in the development of new practical non-GM technologies to help meet future demands.
· Promote and fund better education and training for farmers and address the skills needs of the farming sector in the longer term. For example ensuring there are enough young people coming into the industry with the expertise to produce the food that we are expected to need.
· Increase consumer education on upcoming threats and emerging solutions facing the food chain and the consequent importance of provenance and sustainability.
· Simplify regulations and remove unnecessary red tape where it exists in the food chain. In particular it should consider how the heavy-touch regulation that exists for the farming sector in the UK impacts on competitiveness and how it might achieve more consistency in the application of regulations across the EU.
· Better information sharing across regulatory bodies to reduce the burden but not the effectiveness of inspection. Re-visit existing regulations to ensure they are delivering their intended benefits, and not unintended and unhelpful outcomes.
6.0 How well does Defra engage with other relevant departments across government, and with European and international bodies, on food policy and the regulatory framework for the food supply chain? Is there a coherent cross-government food strategy?
6.1 Cross-government co-ordination has improved since the Strategy Unit's Food Matters report in 2008, but the systems analysis offered by the project has yet to translate into more co-ordinated outcomes for players within the UK food chain. It is still not always clear that different parts of government recognise the impact that decisions made in other areas can have on the whole food chain. It is a challenge to Defra to ensure that effective collaborative mechanisms are in place with other Whitehall departments and regulatory bodies. These mechanisms need to deliver more visible or tangible benefits - not least through setting clear strategic priorities for food security and production across government.
6.2 For instance, the whole food chain would benefit from a clearer definition of the separate roles of Defra and the Food Standards Agency in terms of driving useful outcomes on food labelling. In addition, UK producers would also benefit significantly from clarity and action in the area of public procurement of food by government departments and exploring opportunities for more UK produce to be used by the public sector.
7.0 What criteria should Defra use to monitor how well the UK is doing in responding to the challenge of doubling global food production by 2050 while ensuring that such production is sustainable?
7.1 The strength and capacity of UK food producers are what will be most crucial to meeting future challenges on food production in a sustainable way, at the same time as guaranteeing food security for the population of the UK.
7.2 Defra is already in the process of identifying specific indicators or success measures for UK food security. This should be a collaborative one that draws directly on the experience of the UK farming and food sectors.
[i] Source: DairyCo annual figures to December 2008.